UEKI CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥28.74B
• Operating Income: ¥1.44B
• Net Income: ¥961M
• EPS: ¥146.32

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

FY2026 Q2 was a solid beat on profitability for Uekigumi, with double-digit top-line growth translating into outsized operating profit and bottom-line gains. Revenue rose 27.8% YoY to 287.36, while operating income jumped 67.6% YoY to 14.38 and net income increased 69.1% YoY to 9.60. Gross profit reached 32.40, implying a gross margin of 11.3%. SG&A was well controlled at 18.01, or 6.3% of sales, supporting an operating margin of roughly 5.0%. Ordinary income was 15.03, aided modestly by net non-operating income of 0.64 (0.95 income less 0.31 expenses), including dividend income of 0.59. The effective tax rate was 35.8%, consistent with domestic construction peers. EPS (basic) printed at 146.32 JPY on an average share count of ~6.57 million, and BVPS is calculated at ~4,535 JPY. While prior-year margin levels are not disclosed, the fact that operating income grew far faster than revenue strongly implies operating margin expansion YoY; however, exact basis point changes cannot be quantified from available data. Cash flow data are unreported, so earnings quality via OCF conversion cannot be assessed this quarter. The balance sheet remains conservative: current ratio 188.2%, quick ratio 188.2%, equity ratio (calculated) ~57%, and interest coverage 52.2x underscore low financial risk. Debt is manageable (short-term loans 10.74, long-term loans 16.43) relative to cash and deposits of 87.57. DuPont ROE is 3.2% (NPM 3.3% × asset turnover 0.55 × leverage 1.75x), and ROIC at 3.9% flags underwhelming capital efficiency versus a 7–8% target common in the sector. The payout ratio is calculated at 64.4%, slightly above the <60% benchmark, though dividend policy details and cash coverage are not disclosed. Overall, stronger project execution and cost discipline drove profit outperformance, but sustainability hinges on order backlog quality, cost pass-through, and cash generation, which remain opaque due to missing cash flow disclosures.

Profitability Analysis

ROE decomposition: Net Profit Margin 3.3% × Asset Turnover 0.550 × Financial Leverage 1.75x = ROE 3.2% (matches reported). The biggest inferred driver this quarter is margin improvement, given operating income growth (+67.6% YoY) far outpaced revenue growth (+27.8% YoY). Business explanation: mix/pricing execution in construction projects and SG&A discipline (SG&A/sales ~6.3%) likely lifted operating margin to ~5.0%; modest non-operating tailwinds (dividend income) also supported ordinary income. Sustainability: construction margins can be volatile due to fixed-price contracts and input cost swings; absent backlog detail, we treat this as partially cyclical and not fully bankable. Asset turnover at 0.55 is typical for mid-sized general contractors but limits ROE absent higher margins or leverage. Watch for concerning trend risk if SG&A growth begins to exceed revenue growth; this quarter, operating leverage appears positive (no evidence of SG&A outpacing sales).

Growth Assessment

Top-line growth of 27.8% YoY indicates strong order execution and/or favorable project phasing in H1. Operating income growth of 67.6% and net income growth of 69.1% point to operating leverage and better cost control versus last year. Gross margin at 11.3% and operating margin at ~5.0% are consistent with improved mix and disciplined overheads. Non-operating contributions were modest (net +0.64), with dividend income of 0.59 not altering the core earnings narrative. Outlook hinges on the quality and duration of backlog, cost pass-through to clients, and the competitive bidding environment—none of which are disclosed here. With ROIC at 3.9%, growth is not yet translating into superior capital efficiency; sustaining current profit levels would require continued margin discipline and careful project selection. Given the construction sector’s seasonality and project timing, H2 run-rate may differ; monitor order intake and backlog to gauge sustainability.

Financial Health

Liquidity is strong: current assets 335.37 versus current liabilities 178.20 yield a current ratio of 188.2% and a quick ratio effectively the same, indicating ample short-term coverage. Cash and deposits of 87.57 comfortably exceed short-term loans of 10.74, minimizing near-term refinancing risk. Solvency appears conservative: total equity 298.24 vs total assets 522.35 implies a calculated equity ratio of ~57%, and reported D/E is 0.75x, both healthy relative to benchmarks. Interest coverage is robust at 52.21x (operating income vs interest expense 0.28). No explicit off-balance sheet obligations are reported in the data provided. Maturity mismatch risk is low given the liquidity buffer and modest long-term loans (16.43). No warnings on Current Ratio (<1.0) or D/E (>2.0) are triggered.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be assessed; we cannot confirm cash conversion quality this quarter. Free cash flow and capex are also unreported, limiting visibility on reinvestment needs. Working capital accounts (receivables, inventories, payables) are not disclosed, preventing assessment of timing effects or potential working capital pull-forward. With interest expense low and liquidity strong, near-term cash strain appears unlikely; however, for a project-based business, billing/collection cycles can materially swing OCF. Until OCF/NI is disclosed (benchmark >1.0), we maintain a neutral stance on earnings quality.

Dividend Sustainability

The calculated payout ratio is 64.4%, slightly above the <60% benchmark, implying limited buffer if earnings normalize lower. DPS and total dividends paid are unreported, and FCF coverage cannot be assessed due to missing cash flow data. Balance sheet strength (cash 87.57; low net debt) supports near-term dividend capacity, but sustainability should be evaluated against medium-term FCF generation and capex/working capital needs. Policy outlook is unclear from disclosures; watch for management guidance on payout ratio discipline and any shift toward stable or progressive dividends.

Risk Assessment

Business Risks:

• Project margin volatility from fixed-price contracts and input cost swings (materials, labor).
• Execution and timing risk on large projects affecting quarterly revenue recognition.
• Order backlog visibility not disclosed, creating uncertainty on revenue sustainability.
• Competitive bidding pressure potentially compressing margins.
• Subcontractor availability and cost risk.

Financial Risks:

• ROIC at 3.9% (<5% warning) indicates weak capital efficiency versus sector targets.
• Payout ratio at 64.4% slightly above benchmark, reducing flexibility if earnings soften.
• Cash flow data unreported, obscuring OCF conversion and FCF coverage.
• Exposure to interest rate normalization on refinancing (albeit current leverage is modest).

Key Concerns:

• Capital efficiency below target (ROIC 3.9%) despite profit growth.
• Sustainability of margin expansion without backlog detail.
• Lack of OCF/FCF disclosure limits assessment of earnings quality and dividend cover.

Investment Implications

Key Takeaways:

• Strong H1 operating leverage: revenue +27.8% YoY; operating income +67.6%; net income +69.1%.
• Operating margin around 5.0% with SG&A/sales at ~6.3% indicates improved cost discipline.
• Balance sheet conservative: equity ratio ~57%, current ratio 188%, interest coverage 52x.
• ROE 3.2% constrained by modest margins and asset turnover; leverage remains prudent.
• ROIC 3.9% below sector aspirations, highlighting need for higher-margin projects or asset efficiency gains.
• Dividend payout ratio at 64.4% is slightly above benchmark; cash coverage unknown.

Metrics to Watch:

• Order intake and backlog (volume, margin mix, duration).
• OCF/Net Income and Free Cash Flow to assess earnings quality (>1.0 desirable).
• Gross and operating margin trajectory (bps change YoY/HoH).
• SG&A growth vs revenue growth to monitor operating leverage.
• Working capital turns (receivables days, payables days, WIP) once disclosed.
• ROIC progress toward >5–7% through margin and asset utilization improvements.

Relative Positioning: Versus mid-sized domestic general contractors, Uekigumi shows healthy liquidity and low financial risk with better-than-average interest coverage, but trails on capital efficiency (ROIC 3.9%) and maintains mid-single-digit operating margins; near-term execution is strong, yet medium-term value creation depends on sustaining higher-margin backlog and improving asset efficiency.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis